High-yield bond funds in the U.S. reported a second straight week of withdrawals, with Invesco Ltd.’s junk-debt exchange-traded fund seeing an unprecedented outflow.
Investors yanked $892 million from speculative-grade portfolios this week following last week’s $309 million outflow, according to data compiled by JPMorgan Chase & Co. Invesco’s $1.1 billion ETF that owns junk notes reported an 11.6 percent decline in shares on Oct. 3, equivalent to about $124.7 million of market value, followed by about a $71 million outflow on Oct. 4, according to data compiled by Bloomberg.
After pouring record volumes of cash into high-yield funds this year, bond buyers are shifting their preference to high-grade debt amid signs that slowdowns in business investment and exports was restraining economic expansion. U.S. top-rated funds reported $1.2 billion of deposits following last week’s inflow of $2.3 billion, the JPMorgan research said.
Junk bonds, rated below Baa3 by Moody’s Investors Service and lower than BBB- at Standard & Poor’s, have gained 12.4 percent this year compared with 9.3 percent returns for investment-grade notes, according to Bank of America Merrill Lynch index data.
Relative yields on high-yield bonds contracted by 10 basis points this week compared with a 4 basis point decline on investment-grade debt, the index data show.